State to resume hospital payments

Illinois hospitals with the poorest patients finally will get the second round of payments from a state program long stalled by political bickering.

Aaron Chambers

Illinois hospitals with the poorest patients finally will get the second round of payments from a state program long stalled by political bickering.

The state on Tuesday restarted the program, which means hospitals will collect the additional $470 million they’ve anticipated since early spring.

In Rockford, SwedishAmerican Hospital is counting on $16.5 million to expand its obstetrics unit, which handles most local Medicaid pregnancies, and to make general hospital-infrastructure improvements. It has slated $8 million to $10 million of the money to buy the old Highland Hospital in Belvidere.

Getting started
The payments represent the second year of an elaborate three-year plan to generate more federal dollars for hospitals handling the most patients on Medicaid, the joint state-federal health-care plan for the poor.

It works by shuffling money between the state and hospitals, which triggers federal reimbursement for the state’s Medicaid spending. Hospitals gain $1.4 billion over three years, or $470 million each year. The state wins a three-year total of $390 million, and the feds pick up the $1.8 billion tab.

On Tuesday, the state received a $1.2 billion short-term loan to start the process, said Carol Knowles, spokeswoman for Illinois Comptroller Dan Hynes. She said it dispensed the $1.2 billion to hospitals the same day, thereby beginning the shuffle.

In the coming weeks, the hospitals and state will exchange money. When the state passes it to hospitals, the feds reimburse the state at a rate of 50 percent. Over the course of the cycle, the state will accumulate enough in federal money to cover $470 million for hospitals, plus keep $130 million for itself and pay off the loan.

The state completed the first year of the hospital-aid program in the spring. But it couldn’t execute the second year by spring, as required under Illinois law, because lawmakers had not authorized the spending.

The state borrowed $900 million in the spring to facilitate the first-year payment, and it intended to recycle those dollars for the second-year payments, too.

But without the power to use that money for the second-year payments, the state couldn’t make a payment to hospitals by the time it had to pay off the loan in early June. It paid $12 million in interest on the loan.

On June 14, lawmakers sent Gov. Rod Blagojevich a measure authorizing the state to spend $1.2 billion to begin the process. But the governor waited until Aug. 13, the last day he could act, to sign it.

The next challenge for hospitals: achieving the third-year payments. To make the second-year payments, the state is using the spending authority intended for the third-year payments.

To make the third-year payments, lawmakers must approve another special spending-authorization measure. This may prove to be another political debacle given ongoing gridlock at the Capitol.

“There have been many times this year when simply ordering lunch has been extremely difficult,” said Sen. Jeff Schoenberg, an Evanston Democrat who spearheaded the program.

However, he fears the feds — who must sign off on any future hospital-aid program — will not look favorably on the state’s trouble with this one.

“All the delays in paying these distressed hospitals undercut the state’s ability to effectively argue in the future,” he said, “that we need more federal dollars to address these critical needs.”

Staff writer Aaron Chambers may be reached at 217-782-2959 or achambers@rrstar.com.